esg report 2016 - baltcap · fcr, digital media agency, assisted restructuring process of truvo...

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ESG report 2016

ENVIRONMENTAL, SOCIAL &

GOVERNANCE (“ESG”)

REPORT FOR 2016

April 2017

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ESG report 2016

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ESG report 2016

04 MESSAGE FROM

MANAGING PARTNERS

07 BALTCAP

09 BALTCAP’S APPROACH TO

ENVIRONMENTAL, SOCIAL

AND GOVERNANCE

MATTERS

12 ABOUT THIS REPORT

17 OVERVIEW OF THE 2016

SURVEY FINDINGS

21 CATEGORY SUMMARY:

WORKPLACE POLICIES


ENVIRONMENTAL

POLICIES


MARKETPLACE POLICIES


COMPANY VALUES AND

ANTI-CORRUPTION


COMMUNITY POLICIES

36 ABOUT THE SURVEY

METHODOLOGY

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ESG report 2016

MESSAGE FROM MANAGING

PARTNERS

We are pleased to present our 6th Environmental, Social and Governance

Report. As the leading private equity and venture capital investor in the Baltic

countries we also strive for leading the way in incorporating ESG issues into the

investment process. Every year we ask our portfolio companies to complete a

rigorous self-assessment. Find out more and take a look into this ESG report for

2016.

Together with our portfolio companies we are the leading investor contributing

to the growth of Baltic economy. Looking back, BaltCap has been managing

numerous funds and has made over 70 investments directly contributing to the

regional capacity building. We conduct our operations in accordance with the

highest legal and ethical standards. We expect nothing less from our portfolio

companies.

BaltCap has been following the most rigorous set of principles for responsible

investment for a long time. Our company has been a signatory of the United

Nations Principles for Responsible Investment since 2008. Responsible

investment is a natural part of our business.

BaltCap is also a long-time participant in Estonian Sustainable Business Index.

In 2016, BaltCap participated for the 7th consecutive year. For our long-term

commitment and excellent ESG performance, BaltCap was awarded a silver-

level Quality Label in the 9th Estonian Sustainable Business Index.

In other words, we take performing well in terms of ESG issues seriously and the

results from the 2016 ESG survey prove that again. The average score for ESG

performance among the portfolio companies has improved compared to the

year before. Furthermore, increasing number of portfolio companies have

certified system for managing health, safety, quality, and environmental

performance. Today 50% of the respondents have a management system that

follows internationally acknowledged standards.

Moreover, the improvements and highlights for 2016 include:

Unimed, Estonian dental care provider, opened a new state-of-the-art

clinic in Tartu. The new facilities significantly improve the working

environment and take the customer experience to a new level. In

addition the new location in the city centre is easily accessible by

public transport.

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ESG report 2016

Magnetic MRO, aircraft maintenance service provider, completed its

500th heavy check of commercial aircraft in its base in Tallinn Airport.

Over the years, the company has provided its customers including

airlines based in North-Eastern Europe a reliable service near their

home base reducing the need to fly long distances to have an aircraft

maintained. Furthermore, Magnetic MRO has also improved its service

capacity and is able to carry out heavy maintenance checks for 6

aircrafts simultaneously. During the past few years, the company has

created many new jobs and as an internationally active business has

become an excellent career base for aircraft engineers and mechanics.

FCR, digital media agency, assisted restructuring process of Truvo

Group in Belgium saving the business and ensuring jobs for 300

specialists in Belgium. FCR Media now covers 12 markets in Europe and

South America offering needed advertising services in digital channels

to more than 100 000 small businesses.

Ecoservice, waste management company, continued to reduce the

landfilled waste and improving recycling rate in Lithuania. In 2016, the

company’s secondary raw materials' recycling increased by 14% to 14

076 tons and construction waste recycling more than tripled to 16 712

tons as a result of launching a new construction waste recycling line.

Kelprojektas, Lithuanian road engineering company, contributed to

award winning infrastructure projects: “Movable bridge over the river

Dane on the street Pilis, in Klaipeda”, Product of the Year 2016 by

Lithuanian Confederation of Industrialists and “Project of national

arterial road A5 Kaunas-Marijampole-Suvalkai of the section from 45,15

to 56,83 km reconstruction to highway”, Best Road Project of the Year

2016 in Lithuania.

However, we recognize that to be an industry leader much remains to be done

to keep us above the rest. We continue to strive for excellence, be more and be

part of a sustainable future. If you have any questions or comments about this

report or our ESG principles, please do not hesitate to contact us.

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ESG report 2016

BPT Real Estate

Peeter Saks Martin Kõdar Dagnis Dreimanis Simonas Gustainis

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ESG report 2016

BALTCAP

BaltCap is the leading private equity and venture capital investor in the Baltic

countries focusing on small and midmarket buyout, expansion and growth

capital investments. We partner with ambitious management teams, helping

them to deliver transformational growth through active operational

engagement. We aim to create strong partnerships with the companies we work

with, allowing us to take a hands-on role in strategic development and value

creation.

BaltCap has strong presence in all three Baltic countries with local offices and

experienced investment team. Since 1995, BaltCap has been managing several

private equity and venture capital funds with total capital of over €260 million

and has made 74 investments to date.

We are supported by a broad blue-chip investor base that includes both

international and local institutions like the European Investment Fund, the

European Bank for Reconstruction and Development (EBRD) and the largest

pension funds in the Baltics.

Impuls gym

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ESG report 2016

Investment strategy

BaltCap’s investment philosophy is based on value creation delivered through

active ownership. We focus on working in partnership with management teams

to deliver long-term revenue and profit growth, as well as building businesses

through acquisition. We invest equity or equity-related instruments, and like to

support strong, ambitious management teams with whom we have a good

cultural fit.

Facts about us

Main countries of operation Estonia, Latvia and Lithuania

Number of Investments 74 (of which current 35)

BaltCap Private Equity II SCSp

BaltCap Private Equity Fund L.P.

BaltCap Funds BaltCap Latvia Venture Capital Fund K.S.

Lithuania SME Fund KUB

Baltic Investment Fund III L.P.

Baltic Investment Fund III C.V.

Contact point for questions Triinu Oll, [email protected]

Homepage www.baltcap.com

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ESG report 2016

BALTCAP’S APPROACH TO

ENVIRONMENTAL, SOCIAL AND

GOVERNANCE MATTERS

Our environmental, social and governance principles

As a signatory of the United Nations Principles for Responsible Investment

(UNPRI), an investor initiative in partnership with UNEP Finance and the UN

Global Compact, BaltCap follows the policies and practices of responsible

investment and has incorporated ESG considerations into daily operations.

BaltCap is committed to the following

Participating actively in the strategic management of portfolio

companies through Council and Board memberships;

Identification, credit analysis and supervision of portfolio investments

will be carried out with due regard to ecological and environmental

factors;

Not to invest in companies that are engaged in arms manufacturing,

manufacture of tobacco, hard spirits, gambling, human cloning,

genetically modified organisms and illegal economic activity;

Not to proceed with any investment transaction without knowing who

the beneficial owner of the counterparty is;

Carry out relevant due diligence (including environmental and social

due diligence) in all the investment cases;

Ensure that appropriate standards of corporate governance are in

place or will be implemented within a reasonable time period in all

portfolio companies in compliance with the OECD Corporate

Governance Principles;

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ESG report 2016

Ensure that all portfolio companies comply with the health, safety,

worker protection and environmental regulations and standards

applicable in the country where the investment is situated;

Manage our business affairs sustainably and reduce our overall

exposure to risk;

Comply with EBRD’s Environmental and Social Risk Management

Manual;

Comply with all applicable laws, regulations and best practice

principles of the private equity industry, abiding by the Invest Europe

Professional Standards

BaltCap is actively contributing to the local market development by being a

founding member of the Estonian, Latvian and Lithuanian Private Equity and

Venture Capital Associations. BaltCap is also an active member of Responsible

Business Forum in Estonia.

Implementation and monitoring

In order to provide necessary training and ensure environmental and social

awareness among BaltCap team, the members are regularly attending

conferences and trainings where ESG, sustainable development and corporate

social responsibility topics are part of the agenda.

BaltCap also carries out and compiles an annual self-assessment regarding its

environmental, social and governance procedures as well as performance based

on the UNPRI reporting tool and Responsible Business Forum Estonia

questionnaire. The results of this self-assessment are in turn evaluated, ranked

and published by the Responsible Business Forum in the annual Corporate

Sustainability and Responsibility Index and by UNPRI in its Report on Progress.

In order to ensure that our environmental, social and governance principles are

fulfilled, we monitor portfolio companies’ environmental and social performance

through our own ESG survey, which is presented in this report.

Communication and transparency

Active co-operation through business associations mentioned above is an

important part of our communication activities to address the issues of

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ESG report 2016

responsible entrepreneurship and encourage the development of corporate

responsibility in the Baltic region.

The ESG progress regarding the portfolio companies is reported to our investors

regularly. Material ESG issues are covered in the quarterly reports to investors.

In addition, an annual report is published based on the annual ESG screening

results. Furthermore, there is of course daily communication and co-operation

with our business partners.

Stenders shop in Asia Pacific

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ESG report 2016

ABOUT THIS REPORT

This is our 6th annual report presenting BaltCap’s principles and performance in

Environmental, Social and Governance (ESG) matters. Our previous ESG report

was published in February 2016. This report is the main point of reference for

our stakeholders regarding our annual Environmental, Social and Governance

performance.

Background

BaltCap is a signatory of the United Nations Principles for Responsible

Investment (UNPRI) initiative and thus committed to implement the principles

and communicate on the progress. Since 2011 we are annually carrying out an

ESG survey among our portfolio companies in order to follow up and measure

the progress in ESG matters.

The purpose of the survey is also to highlight the importance and raise

awareness regarding responsible entrepreneurship. We hope that the

questionnaire helps companies to identify the material aspects and relevant

actions they can take to strengthen their businesses, reputation and reduce their

overall risk exposure.

ESG survey 2016

The survey carried out during the period December 2016 - February 2017 had

the same scope and was identical with the questionnaire used in ESG survey

2015. The main focus of the survey is to provide an ESG performance overview

that meets the expectations of our investors and the latest developments in the

private equity industry. The questionnaire is designed to fully comply with the

latest requirements of European Bank for Reconstruction and Development for

annual environmental and social reporting.

32 out of 33 currently active portfolio companies responded to the

questionnaire. The response rate was 97% (88% in 2015). 13 out of 13 portfolio

companies of BaltCap Private Equity Fund I&II responded to the survey. The

participation was voluntary for JEREMIE initiative funds’ companies (BaltCap

Latvia Venture Capital Fund and Lithuania SME Fund) and in total 19 out of 20

of those companies responded to the survey, demonstrating continuous interest

in ESG issues.

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ESG report 2016

Methodology in brief

In the same way as the year before, our ESG questionnaire for 2016 consisted of

five main categories (see Table below) each divided into three groups of

questions assessing respondents’ ESG profile, risk management and

performance. The survey is carried out in form of a web-based self-assessment

questionnaire signed by management/executive officer of each participating

portfolio company.

Profile Risk Performance

indicators management indicators

Workplace policies

Environmental policies

Marketplace policies

Company values &

anti-corruption

Community

Overview of respondents

The scope and boundaries of this report include the following companies

presented below.

Type of

business

Employees Turnover

(€000)

Environmental

& social risk

classification*

Private equity (PE) portfolio – including the companies of BaltCap Private Equity II SCSp, BaltCap Private Equity Fund L.P., Baltic Investment Fund III L.P. and Baltic Investment Fund III C.V.

Property

management 87 4 404 Medium

Dental care provider

273 10 168 Medium

Waste management

581 27 928 Medium/High

Assesses the

policy &

management

system of

the portfolio

company

Assesses

the portfolio

company’s

approach to

manage

risks

Examines the

portfolio

company’s

performance

and

transparency

http://www.baltcap.com/pe-strategy/ecoservice

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ESG report 2016

Waste management


Directional media company

1 069 87 125 Low

Financial technology solutions

113 11 467 Low

Machinery trade 263 58 492 Low

Transport infrastructure engineering

298 10 183 High

Aircraft maintenance, repair and overhaul

344 47 085 Medium

Occupational health care

77 4 715 Medium

Business process outsourcing service provider

905 22 263 Low

Road construction and maintenance

357 53 930 High

Pumping systems rental


Subtotal 5 086 372 815

Portfolio of JEREMIE initiative funds – including the companies of-BaltCap Latvia Venture Capital Fund K.S., Lithuania SME Fund KUB

Software development

29 940 Low

Metal components producer


Data interchange solutions

15 840 Low

Postal operator 22 1 838 Low

Ultra-fast database management system

27 478 Low

Chain of branded coffee shops

289 7 990 Medium

Garden furniture production

177 8 986 Medium

http://www.baltcap.com/pe-strategy/fcr-media

http://www.baltcap.com/pe-strategy/intrac-group-ab

http://www.baltcap.com/pe-strategy/kelprojektas-uab

http://www.baltcap.com/pe-strategy/magnetic-mro-as

http://www.baltcap.com/pe-strategy/sia-runway

http://www.trev2.ee/

http://www.baltcap.com/pe-strategy/agroup

http://www.baltcap.com/pe-strategy/postservice-group

http://www.clusterpoint.com/

http://www.baltcap.com/pe-strategy/coffee-inn

http://www.ekju.lv/en

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ESG report 2016

Liquid crystal display producer

25 730 Medium

Gym and health clubs operator

412 15 536 Low

Medical care services provider

397 6 536 Medium

Laboratory supply provider

60 7 076 High

Chocolate manufacturer

65 3 487 Medium

Cosmetics producer

141 6 276 High

Urban journey planning application

40 1 033 Low

Monitoring systems for vending machines

12 914 Medium

Building technical system maintenance

53 1 505 Medium

Volumetric 3D monitor developer and supplier

1 1

Subtotal 1 811 66 790

Grand total 6 897 439 605

TREV-2 street maintenance

http://www.baltcap.com/pe-strategy/trafi

http://pastatuvaldymas.com/

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ESG report 2016

€79 million of

net salaries paid by portfolio

companies in 2016 €62 million

of total taxes paid

(including social taxes, PIT and CIT)

in 2016 €24 million

of total capital

expenditure in 2016

Overview of private equity portfolio companies

Each year the portfolio companies also pay significant amounts in salaries, taxes

and invest in the development of the business.

23

38

Entry Latest

EBITDA of PE portfolio (€m)

253

492

Entry Latest

Revenues of PE portfolio (€m)

95%

4 681

7 359

Entry Latest

Employees in PE portfolio

61%

57%

€61 million (2015)

€17 million (2015)

€34 million (2015)

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ESG report 2016

OVERVIEW OF THE 2016 SURVEY

FINDINGS

ESG Survey results 2014-2016

Summary

In 2016, the ESG performance

improved on the overall level and in

the Workplace, Environmental and

Marketplace category. The score

remained on the same level in the

Company values & anti-corruption

category and had a minor drop in the

Community category.

The average score across all

respondents and all ESG categories

has increased from 45% in 2014 to

50% in 2016. We are delighted to

report that the overall performance

has continued to improve since 2014.

As the year before, the portfolio

companies continue to perform best

in the category Workplace policies

(average score 70%), reflecting that

the portfolio companies put a strong

emphasis on the health and safety

issues as well as employee

satisfaction and employees’ views

regarding important issues for the

business. Companies’ relatively strong

performance in this category

compared to the other topics can also

be explained by the rather effective

enforcement of the legislation

regarding the occupational health and

safety as well as labour rights.

Another category where the general

performance scored above average

was Marketplace Policies (60%).

Service quality and customer

satisfaction, which are some of the

61%

38%

55%

43%

28%

65%

43%

57%

43%

32%

70%

45%

60%

43%

32%

WorkplacePolicies

EnvironmentalPolicies

MarketplacePolicies

Company valuesand anti-

corruption

Community

2014 2015 2016

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ESG report 2016

questionnaire topics in this category,

are essential issues for every business

and thus companies in general

demonstrate a strong performance in

this section.

The category where portfolio

companies scored below average and

have most development potential was

Community. Compared to the last

year’s result the category average

dropped slightly, remaining however

above the outcome for 2014.

Community engagement is still

considered secondary to day-to-day

business issues. Nevertheless, as the

governments’ and public interest in

businesses contributing to local

community capacity building and

social responsibility is increasing, this

category has a potential to become

important in the near future.

Certified management systems for

managing ESG issues such as ISO

90001, ISO 14001 and OHSAS1800 are

applied by increasing number of

companies. However, the small-size

enterprises still apply a practical

approach based on team members’

common values and goals for the

business rather than documented

procedures and policies.

76%

Consider ESG policies important in

the business environment where they

operate

50%

Average score 2016

48%

Average score 2015

45%

Average score 2014

Among the specific issues covered in

the survey, the common practice

among all respondents and all

business sectors are promoting equal

opportunities at work including

process for countering all forms of

discrimination, ensuring occupational

health and safety, making

improvements in the working

environment, taking into account

employees’ views regarding

important issues for the business and

resolving complaints from customers,

suppliers and business partners.

Risk management remains a major

challenge and in many categories the

average score has decreased

compared to 2015. Comparing the risk

assessment in all categories, the

environmental risk assessment is most

frequently mentioned procedure. Risk

assessment regarding risks related to

corruption is a rare practice and still

applied by only a small share of

respondents.

To sum up, the average ESG

performance has improved compared

to the last year, however there is

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ESG report 2016

space for improvement when it comes

to Company values and anti-

corruption and Community category

management. This is something we

take seriously and need to put some

more focus during 2017.

Based on the survey in ESG in 2016,

Magnetic MRO, TREV-2 and FCR were

among the best performers.

Magnetic MRO Hangar

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ESG report 2016

ESG Management in portfolio companies 2014-2016

Unimed Grupp dental clinic

21%

29%

36% 36%

29%35%

47% 47%

35%

53% 53%

29%

Share of enterprisesthat carry out

background checkof significantsuppliers and

business partners

Share of enterprisesthat have processfor assessment of

ESG risks

Share of enterprisesthat put

environmentaland/or social

requirements ontheir suppliers

Share of enterprisesthat have a certifiedmanagement system

for quality,environment and/or

health

Jeremie Initiative Funds2014 2015 2016

23%

38%46% 46%43% 43%

50% 50%54%

62%69%

77%

Share of enterprisesthat carry out

background checkof significantsuppliers and

business partners

Share of enterprisesthat have processfor assessment of

ESG risks

Share of enterprisesthat put

environmentaland/or social

requirements ontheir suppliers

Share of enterprisesthat have a certifiedmanagement system

for quality,environment and/or

health

BaltCap Private Equity Fund 2014 2015 2016

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ESG report 2016

CATEGORY SUMMARY: WORKPLACE

POLICIES

Workplace policies overview 2014-2016

Achievements and challenges

In the same way as the year before,

the good common practice within

Workplace policies continues to be:

Ensuring necessary

arrangements for health,

safety and welfare to

provide sufficient protection

for employees (100% of

respondents);

Seeking and taking into

account employees’ views

regarding important issues

for the business (100%);

Improving working

environment in offices

and/or facilities during the

reporting period (100%);

Promoting employees to

develop real skills and long-

term careers for instance via

a performance appraisal

process and/or a training

plan (97% or respondents).

70%

Average score 2016

65%

Average score 2015

61%

Average score 2014

60% 60%66%

62%

79%

70%66%

74%77%

Profile indicators Risk management Performance indicators

2014 2015 2016

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ESG report 2016

Other examples of common practices

are: promoting equal opportunities

within the workforce, applying

measures to enable a good work-life

balance for its employees (e.g. flexible

working hours), zero tolerance

against all forms of discrimination in

recruitment process as a formal policy

or non-formal code of conduct, and

setting and follow-up of quantitative

targets for employee satisfaction.

Examples of important achievements

include among others: improved

offices/working environment

(Agroup, BPT Real Estate,

Clusterpoint, Unimed, Fitek,

Kelprojekts, Labochema, Runway,

Stenders, Trafi, and Uprent),

improving work efficiency (FCR,

EKJU, Intrac Estonia, Kelprojektas,

Vendon, and Ygle pastatu valdymas),

improved occupational health and

safety measures (Boxnet, Bluebridge

Technologies, Magnetic MRO, EKT,

and EUROLCDS), actively promoting

work-life balance (Unimed and

Clusterpoint), and reduced number of

workplace accidents (TREV-2).

The main topics where companies in

general score low are quantitative

targets for occupational health and

safety, and risk assessment

procedures. Nevertheless, risk

assessment is relatively common

among industrial/high-impact

companies.

The challenges for the future reported

by the participants comprise mainly

working environment, health and

safety at work, employee satisfaction,

enabling flexible working hours and

work-life balance. For example,

Agroup, Coffee Inn, FCR, and Vendon

all report maintaining high employee

satisfaction as a crucial challenge for

sustainable business. Further -

BoxNet, Post Service, Post Service

Kurzeme, EKT, Magnetic MRO, and

TREV-2 report improving

occupational health and safety and

reducing number of work place

accidents to zero as one of the major

challenges in short term. Improving

training and qualification of

employees (Ecoservice, Unimed,

Vendon, Ygle pastatu valdymas) is

another example of the reported

challenges.

100%

Companies confirm that there were

no cases of discrimination at work in

the reporting period

90%

Companies actively offer a good

work-life balance for its employees

100%

Companies have suitable

arrangements for health and safety to

provide sufficient protection for

employees

33 No of

accidents (2016)

14 (2015)

0 Fatalities

(2016)

0 (2015)

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ESG report 2016

The total number of lost workdays

was 851 in 2016, 267 in 2015 and 667

in 2014. The number of lost workdays

is higher compared to the years

before due to the increase in the

number of accidents and due to some

accidents that resulted in long

incapacity and recovery periods

(including two cases of non-

observance regarding labour safety

instructions resulting in leg fractures

with long recovery period).

Investigations were carried out in

each case and additional preventive

measures in form of trainings and

clear instructions were implemented.

Qvalitas Arstikeskus mobile clinic

0.39 No of

lost days per employee

(2016)

0.17 (2015)

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ESG report 2016

CATEGORY SUMMARY: ENVIRONMENTAL

POLICIES

Environmental policies overview 2014-2016


The good common practice includes:

Clearly defined highest level

of direct responsibility for

environmental performance

(87% of respondents);

Considering the potential

environmental impact when

developing new products

and services (70%);

Providing goods/services

that directly enable avoiding

negative environmental

impact by customers or a

third party (60%).

Furthermore, 50% of companies have

identified ways how to use the

sustainability of its products/services

as a competitive advantage.

45%

Average score 2016

43%

Average score 2015

38%

Average score 2014

42%

19%

43%45%

33%

45%50%

37%

46%


2014 2015 2016

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ESG report 2016

Many companies (50%) provide

environmental information on its

products, services and activities. Also,

the share of companies that have a

written environmental policy has

increased from 21% in 2014 to 40% in

2016. The same figure has increased

from 24% in 2014 to 43% in 2016, when

only comparing the companies that

participated both in ESG survey 2014

and 2016.

Increasing the amount of waste that is

treated and recycled was the most

often mentioned environmental

measure among the survey

participants, 32% of reported

measures in 2016 (35% in 2015). Other

common environmental measures

include waste minimization, 20% of all

reported measures in 2016 (19% in

2015). Producing or purchasing

energy from renewable sources has

increased slightly, from 12% in 2014 to

16% of reported measures in 2016. The

same figure has increased from 5% in

2014 to 14% in 2016, when only

comparing the companies that


and 2016. Further, improving energy

efficiency was also a rather common

environmental measure (14%). For

instance, EKJU has reported savings

around 10000 EUR per year thanks to

energy efficiency measures.

Focus on environmental management

and performance has in general

increased during the last years.

Growing number of companies report

that they have a certified

environmental management system

ISO 14001 (in total 23% of

respondents): Amateks, Ecoservice,

EKT, Kelprojektas, Magnetic MRO,

TREV-2, and Ygle pastatu valdymas.

Furthermore, the share of companies

that have quantitative targets for their

environmental performance has


2016. The same figure has increased

from 14% in 2014 to 33% in 2016, when

only comparing the companies that


and 2016. Also environmental risk

management is reported by growing

number of companies.

During 2016, zero cases of

environmental non-compliance were

reported, however two cases of

environmental accidents were

reported. These cases regarded fires

on waste treatment sites; the

necessary corrective actions were

taken instantly.

In Environmental category, the areas

where companies received in general

rather low results were: published

information about the company’s

environmental performance, reducing

greenhouse gas emissions from

business operations, and purchasing

vehicle fuels from renewable sources.

Highlights from 2016 regarding

environmental achievements among

portfolio companies include improved

waste management (Ecoservice, EKT,

FCR, Intrac, Kelprojektas, Magnetic

MRO, and Uprent), and improved

resource efficiency (BPT Real Estate,

EUROLCDS, and Ygle pastatu

valdymas). For instance, Ecoservice

reports among other

accomplishments: 12% increase in the

amount of secondary raw materials

sorted out and prepared for recycling

compared to the year before.

Further, many portfolio companies

also mention energy efficiency

improvements as their most

important environmental

accomplishment for 2016 (BoxNet,

Post Service, Post Service Kurzeme,

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ESG report 2016

BPT Real Estate, EKJU, EKT, EuroLCD,

Impuls, and Magnetic MRO).

Respondents have estimated their

annual cost savings thanks to the

energy efficiency measures around

€10500 per year.

87%

Companies have clearly defined

highest level of direct responsibility

for environmental performance

50%

Companies need and have a legal

permit to operate

53%

Companies were visited by the local

authorities to monitor their

environmental and/or social

performance during 2015

0%

15%

63%

22%

0%

10%

71%

19%

0%

18%

48%

33%

Reducedperformance

Data not available No change inperformance

Improvedperformance

Environmental performance compared to the previous year 2014 2015 2016

51%

16%

14%

9%

7%3%

Waste minimization

and recycling Improve energy efficiency

Purchasing or

producing electricity

from renewable

sources

Purchasing eco-labelled

office supplies

Reducing greenhouse gas

emissions

Purchasing vehicle fuels

from renewable sources

27

ESG report 2016

CATEGORY SUMMARY: MARKETPLACE

POLICIES

Marketplace policies overview 2014-2016

Achievements and challenge

The common practice in Marketplace

category continues to include:

Process for documenting

and resolving complaints

from customers, suppliers

and business partners (100%

of respondents);

Timely payment of suppliers’

invoices (93%);

Process to ensure effective

feedback, consultation

and/or dialogue with

customers, suppliers and the

other business partners

(93%), and

Policy to ensure honesty and

quality in all contracts,

dealings and advertising

(83%).

’

60%

Average score 2016

57%

Average score 2015

56%

Average score 2014

58%

10%

63%60%

17%

63%64%

15%

62%


2014 2015 2016

28

ESG report 2016

In general, the performance and

awareness regarding market place

policies has improved. Many

companies ensure providing clear and

accurate information and labelling

about products and services,

including the after-sales obligations

(80%). The share of companies that

have quantitative targets for service

quality and/or customer satisfaction

has increased from 54% in 2014 to

77% in 2016. The same figure has


2016, when only comparing the

companies that participated both in

ESG survey 2014 and 2016. A written

policy for quality management is

becoming increasingly common

practice, 73% of respondents had

such policy in 2016 compared to 63%

in 2014. In addition, certified quality

management system ISO 9001 is also

applied by increasing share of

companies, reaching 47% in 2016

compared to 38% in 2014.

Compared to 2014, the share of

businesses that put environmental

requirements on their suppliers has

increased from 38% to 50%. Share of

enterprises that put social

requirements on their suppliers has

also increased from 21% to 33%.

Risk assessment of potential negative

impacts on society and/or

environment in the supply chain

remains to be one of the main

challenges in the marketplace

category, currently a rather low share

of the respondents (17%) have such

procedures in place. Other challenges

in this category reported by the

participants are improving service

quality and customer satisfaction.

Among important accomplishments

are for example Kelprojektas that has

contribution to award winning

infrastructure projects: “Movable

bridge over the river Dane on the

street Pilis, in Klaipeda” (Product of

the 2016 Year by Lithuanian

Confederation of Industrialists) and

“Project of national arterial road A5

Kaunas-Marijampole-Suvalkai of the

section from 45,15 to 56,83 km

reconstruction to highway” (Best

Road Project of the Year 2016 in

Lithuania); and TREV-2 that has

improved working culture and

increased profitability during 2016.

Agroup, Clusterpoint, BPT Real

Estate, EKJU, FCR, Magnetic MRO,

Vendon, and Ygle pastatu valdymas

report the improved product and/or

service quality as the most important

accomplishment for 2016. Finally, the

improved customer satisfaction was

the important achievement for Impuls,

Intrac, Labochema, Trafi, and Uprent.

73%

Companies confirm that their targets

for service quality and/or customer

satisfaction in 2015 were achieved in

time

100%

Companies registered and resolved

complaints from customers, suppliers

and business partners during 2015

29

ESG report 2016

83%

Companies have a formal or non-

formal policy to ensure honesty and

quality in all its contractrs, dealings

and advertising

50%

Companies put environmental

requirements on their suppliers

33%

Companies put social requirements

on their suppliers

Impuls Gym

50% Have

ISO 9001 quality

management system or

similar (2015)

36% (2015)

30

ESG report 2016

CATEGORY SUMMARY: COMPANY VALUES

& ANTI-CORRUPTION

Company values and anti-corruption overview

2014-2016


The common practice in the category

Company values and anti-corruption

includes:

Clearly defined values and

written rules of conduct

including principles for

countering bribery and

corruption (57%)

Communicating enterprise's

rules of conduct including

anti-corruption principles to

customers, business

partners, suppliers and other

interested parties (60%)

Performance and

background check of your

significant suppliers and

business partners (43%).

Background check of suppliers is

most commonly carried out by:

revising documentation covering

supplier’s financial performance,

experience, business ethics and/or

reputation.

43%

Average score 2015

43%

Average score 2015

34%

Average score 2014

In total 30% of the companies have

internal reporting procedures for

countering bribery and corruption

(e.g. whistle-blowing procedures).

43%

22%

55%

46%

21%

56%

43%

19%

58%


2014 2015 2016

31

ESG report 2016

This is an improvement compared to

2014 where only 25% of the

respondents reported having such

procedures in place. Risk assessment

of business operations regarding risks

related to corruption is still rather rare

practice among respondents (10%)

and needs to be improved. However,

companies that have risk assessment

in place commonly apply systematic

and documented risk assessment

procedures. Training for employees

regarding company's rules of conduct

and anti-corruption principles was

carried out by 30% of respondents,

which is a positive development

compared to 25% in 2014. The same

figure has increased from 24% in 2014

to 33% in 2016, when only comparing

the companies that participated both

in ESG survey 2014 and 2016.


from 2016 comprise: Magnetic MRO

that has developed and is

implementing a Code of Conduct for

the business, including among other

topics anti-corruption principles;

TREV-2 that follow up compliance

with company’s Code of Business

Ethics and Declaration of Business

Interests; Unimed that has improved

its procedures regarding making

procurements and purchasing; and

Labochema that carried out a training

for employees regarding company

values and anti-corruption.

Challenges for the future reported by

the companies include establishing

fair and transparent procurement and

purchasing processes (TREV-2, Ygle

pastatu valdymas, and Impuls); to

ensure high business ethics and zero

tolerance regarding corruption

(Coffee Inn, EKJU, Magnetic MRO, and

Uprent); improving internal reporting

methods for anti-corruption

(Clusterpoint, TREV-2); and

developing written rules of conduct

(Agroup).

57%

Companies have clearly defined

values and written rules of conduct

including principles for countering

bribery and corruption

97%

Companies confirm that they did not

ecperience any difficulties in

implementing the anti-corruption

procedures in 2015

43%

Companies carry out performance

and background check of significant

suppliers and business partners

30%

Companies carried out training for

employees regarding principles for

countering bribery and corruption

during 2015

30%

Companies have internal reporting

procedures for countering bribery

and corruption (e.g. whistle-blower)

32

ESG report 2016

In one case an employee of a portfolio

company was suspected to have

received bribe from provider of

materials. In the second case an

employee was identified selling scrap

metal belonging to the portfolio

company. Both cases resulted in

corrective actions to ensure that the

misconduct would not happen again.

BPT Real Estate

2 No of incidents of corruption

(2016)

0 (2015)

33

ESG report 2016

CATEGORY SUMMARY: COMMUNITY

POLICIES

Community policies overview 2014-2016


The portfolio companies in general

have least experience in Community

category related management

systems and activities; some of the

more frequently reported procedures

are:

Policy for purchasing locally

(50%)

Encouraging employees to

participate in local

community activities, e.g.

providing employee time

and expertise, or other

practical help (60%)

Providing regular financial

support to local community

activities and projects, e.g.

charitable donations or sponsorship

(40%)

The average score in Community

category has remained on the same

level as for 2015.

32%

Average score 2016

32%

Average score 2015

28%

Average score 2014

29%

22%

28%

35%

30% 31%28%

19%

34%


2014 2015 2016

34

ESG report 2016

Other examples of good practice in

Community category includes:

funding non-governmental

organizations and/or programs to aid

vulnerable social groups in the local

community (Unimed, FCR, Impuls,

Intrac, Kelprojektas, Pure Chocolate,

and Ygle pastatu valdymas) by

supporting local sports clubs,

providing internships for students,

and/or making donations to aid to

disadvantaged groups; and dialogue

with the local community on adverse,

controversial or sensitive issues that

involve the business (BPT Real Estate,

EKT, Impuls, Intrac, Magnetic MRO,

and TREV-2).

Participating in pollution prevention

programs is least common

community engagement activity

among the companies. However,

participation in such activities has

grown slightly compared to 2014.


from 2016 include: increasing

employees’ involvement in

community activities generating

social benefits (Ygle pastatu

valdymas); arranging healthy living

awareness campaigns and non-formal

events for local community (Impuls);

supporting local municipality business

environment improvement program

(EUROLCDS); participating in the

local community activities as one of

the major employers in the

community (EKJU); and developing

company’s core business of providing

dental care that is an essential service

in many communities (Unimed).

The challenges in Community

category comprise among other

topics: identifying and participating in

community activities in a way that

benefits both the community and the

business (Agroup, Unimed, FCR,

Impuls and Runway), improved

community dialogue (BPT Real Estate

and TREV-2); and establishing

collaboration with local communities

for job training and capacity building

(EKJU, EUROLCDS, and Ygle pastatu

valdymas).

During 2016, there were no reported

cases of complaints and/or

grievances from the members of the

public or civil society organizations (1

case in 2015).

60%

Companies encourage employees to

participate in local community

activities

20%

Companies have dialogue with the

local community on adverse,

controversial or sensitive issues that

involve the business operations

40% Companies that

give regular financial support

to local community

activities and projects (2016)

46% (2015)

50% Companies that have policy for

purchasing locally (2016)

54% (2015)

35

ESG report 2016

47%

Companies consider that they are

better placed to meet the challenges

of the market thanks to the ESG

policies they have in place

13%

Companies participated in

national/international policy

programs for ESG in 2016 (14% in

2015)

Caffeine Viru Center (Tallinn, Estonia)

36

ESG report 2016

ABOUT THE SURVEY METHODOLOGY

The survey was carried out during the period December 2016 - February 2017.

19 out of 20 currently active Jeremie Initiative portfolio companies responded

to the questionnaire, and 13 out of 13 currently active BaltCap Private Equity

portfolio companies responded to the questionnaire. Compared to the last year,

the response rate has slightly decreased. The reason for that is among other

things the fact that Post Service, Post Service Kurzeme and BoxNet who are

registered as three individual companies but carry out identical services filled in

a common response, also one Lithuanian company from Jeremie Initiative

portfolio decided not to participate in this year’s survey.

The content and number of questions in the current survey was identical with

the surveys for 2014 and 2015. The included categories and the framework for

screening ESG performance is presented on page 7. Further, the questionnaire

was prepared in two versions based on the health and safety risk level and

environmental impact of the businesses. Based on the type of business,

companies were divided into two groups and received a group specific

questionnaire: service sector questionnaire – office-based service companies, 18

(18 in 2015); or industry sector questionnaire – companies providing

maintenance, construction, infrastructure, transportation and technology

services, 14 (10 in 2015).

The scoring system for responses was identical with the surveys for 2014 and

2015. The purpose of this current scoring system is to be able to take into

account and promote respondents for additional information and comments

regarding their working methods and performance. In the current survey, each

answer received score from 0 to 5, where 0 was given for insufficient/lack of

information and 5 was maximum score given for an answer including additional

information describing work procedures, achievements and/or other

performance data. Finally, the total score was converted to percentages by

dividing each company’s result with the maximum possible score.

esg report 2016 - baltcap · fcr, digital media agency, assisted restructuring process of truvo...

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